Benefits

Kiran Stacey

The news this morning has been dominated by the piece written in today’s Times by Nigel Lawson, the former chancellor, who has said he would vote to leave the EU.

He repeated criticisms first made to the FT back in January, when he attacked David Cameron’s strategy of renegotiating powers from Brussels. He told us at the time:

It would be politically very difficult, if not impossible, for Cameron to agree to give up our budget rebate and that’s a precondition of any change.

 

Kiran Stacey

I’ve updated this post at the bottom in light of this afternoon’s parliamentary debate on the issue.

As the Tories contemplate the fallout from coming third in the Eastleigh byelection, different ministers have been floating different ideas for recapturing the votes lost to Ukip. One such idea is banning newly-arrived migrants from accessing certain benefits and NHS services.

Polls suggest immigration is a major reason for voters choosing Ukip, and Conservatives worry that trend will only accelerate when limits on movement from Bulgaria and Romania to elsewhere in the EU are removed.

A cabinet sub-committee has been convened to look into the policy options, but in the face of EU rules forbidding discrimination between citizens of different European countries, is there anything they can do, or is this empty populist rhetoric? 

Jim Pickard

One big question which hangs like a fog around Labour is what the party would do with the benefits bill if it was in power.

Ed Miliband’s argument is that if he was prime minister, the social security tab would not have risen so sharply in the past few years because there would be less unemployment. Clearly that is not a hypothesis that can be tested. 

Kiran Stacey

David Cameron and his party criticised for 'shirkers vs workers' rhetoric. Getty Images

MPs on all sides of the Commons have piled into the Tories – and particularly George Osborne – over the party’s developing narrative of “shirkers vs workers” (or if you like “skivers vs strivers”).

Sarah Wollaston, the Tory MP, was one of the first from her side to speak out against the kind of image seen in one of her party’s latest campaigns, which depicts an unemployed person slumped on a sofa, apparently unwilling to work. She told the Commons: 

Tom Burgis

George Osborne

Welcome to our rolling coverage of the Autumn Statement.

George Osborne has missed his fiscal targets and cut corporation tax.

We’ll bring you all the day’s developments live. By Tom Burgis and Ben Fenton.

15.45: We’re winding up the blog now, but you can follow events as they unfold through constantly updating stories on the front page of FT.com

15.31: A representation of the “flamethrower of uncertainty” can be found in the documentation of the OBR. It is also known as a “fan chart”. I doubt George Osborne is a fan of it, though.

15.24: Chote speaks of the “flamethrower of uncertainty”- a favourite phrase, unsettlingly enough, of the OBR, which is a chart showing forecasts in a wide range that makes the chart lines look like a firebreathing dragon.

15.18: Chote says that the variation in the possible range in the forecast of net debt figures for the UK is a large number, but is “dwarfed by the scale of uncertainties” on the issuance of debt. I think that’s the second time he has said that in his address.

15.12: The Spectator is running a rather scary chart showing the lost output of the current “seven-year slump” in the UK.

15.07: Robert Chote, director of the Office for Budget Responsibility, is live now, going through his department’s figures that underpinned the bad news Mr Osborne has just had to deliver.

15.05: Gavyn Davies has blogged for the FT with his view on the autumn statement while the FT’s Lucy Warwick-Ching has collated some very interesting instant reaction from personal finance experts.

14.49: Hannah Kuchler on the FT’s UK desk has been keeping an eye on business reaction to the autumn statement.

She says:

The CBI, the employer’s organisation, urged the government to stick to its guns on deficit reduction to retain international credibility, saying it was no surprise that austerity would last longer than expected.

John Cridland, director-general, welcomed investment in infrastructure and support for exports, but said the proof was in the delivery. He said:

“Businesses need to see the Chancellor’s words translated into building sites on the ground.”

But the British Chambers of Commerce was less positive, declaring the statement not good enough for a country meant to be in a state of “economic war”.
The government is just “tinkering around the edges”, John Longworth, the BCC’s director general said, adding: “The Budget next March must make truly radical and large-scale choices that support long-term growth and wealth creation. That means reconsidering the ‘sacred cows’ of the political class, including overseas aid and the gargantuan scale of the welfare state. Only a wholesale re-prioritisation of resources, to unlock private sector finance, investment and jobs, will be enough to win the ‘economic war’ we are facing. The danger is that our political class is sleepwalking with its eyes open.”

14.40: Lionel Barber, the FT’s editor, just passed by the live news desk so we asked him what he thought of the autumn statement.

The Chancellor is in a hole, but the good news is that he’s stopped digging. The FT supports the government’s fiscal stance, but is there more to be done on monetary policy to boost growth? That’s the question.

14.26 Who says the British don’t like doing things the French way? Might we surmise from this tweet from the BBC’s Robert Peston’s interview with Danny Alexander, Osborne’s Lib Dem No2, that the UK’s crediworthiness might be going to way of its Gallic cousins’?

[blackbirdpie url="https://twitter.com/Peston/statuses/276330461142327296"]

Others are more chipper:

[blackbirdpie url="https://twitter.com/MJJHunter/statuses/276330252601524225"]

 

Kiran Stacey

George Osborne and Nick CleggBack in September, Nick Clegg said he would block any attempt by George Osborne to freeze benefits in this week’s autumn statement. This put the chancellor in something of a quandary. He had been hoping to save several billions with the move, as well as winning the support of a public that is increasingly hostile to people who are claimants.

Another option remains on the table, however, is to allow benefits to rise, but not by as much as they would normally do if the link with inflation is kept. New analysis from the Institute of Public Policy Research suggests there could still be a fair amount of savings to be gained, for example, by increasing them by just 1 per cent.

The IPPR has produced a table of savings from possible options open to the chancellor: 

Jim Pickard

During the prime minster’s speech today he castigated the unfair system whereby families were punished if their child got a job:

“If a family living on benefits wants their adult child to stay living at home they are actually penalised – as soon as that child does the right thing and goes out to work”. 

Kiran Stacey

Unless there is a last minute U-turn in Whitehall tonight, one of the ways which George Osborne will pay for the various jobs and infrastructure schemes in Tuesday’s growth review will be to squeeze tax credits.

This is a result of protracted bargaining – Osborne wanted to freeze benefits, but the combined efforts of the Lib Dems and Iain Duncan Smith put a stop to that. Eventually the compromise was made that credits would come under the axeman’s blade instead.

So who suffers if these are frozen or cut? 

Kiran Stacey

We revealed earlier this month that George Osborne was considering slashing the benefits bill by linking them to earnings (which are stagnant), rather than inflation (which is rising fast).

Since then, the chancellor has been locked in a battle, not only with Nick Clegg, but also Iain Duncan Smith, the Tory work and pensions secretary, about whether the government should do this, having previously said benefits would rise in line with CPI.

If Vince Cable is to be believed, it looks like IDS and his Lib Dem allies have won this one. The business secretary told the BBC’s Politics Show: 

Kiran Stacey

UPDATE: I have now added in housing benefit – apologies for the omission, and thanks to Paul Treloar for pointing it out.

The brains over at the Treasury are currently trying to work out if there is a way to cut billions of pounds of public spending by freezing benefits in a way that would also be palatable to most voters. As we reported last week, it looks like pensions will be exempted from any freeze to avoid accusations of punishing older people. But what else is up for grabs, and how much could be saved?

Here is a table of each of the most significant benefits paid out by DWP and how much each one costs. I’ve done one column for how much was spent last year, one for how much is forecast to be spent next year, factoring in various policy changes, and one for how much they would cost next year if there were no spending cuts and they were allowed to rise with 5.2 per cent inflation. 

Kiran Stacey

Labour is in a slightly difficult position about how to respond to the news in the FT today that the Treasury is looking to slash benefits by linking them to earnings or even freezing them temporarily.

Although Cameron said he wouldn’t “balance the books on the back of the poor”, Labour knows that attacking the government for hypocrisy on this point could make it look like they are standing up for benefits’ claimants – or “scroungers” as they are thought of by many people.

Instead, the opposition will want to pick its battles. At the moment, the Treasury is still actively considering applying this change to all benefits and pensions, which would affect a lot of people who don’t fall into the “scrounger”. 

A new means test. A savers penalty. A hit in income for 600,000 prudent households. Is this really Tory policy?

Buried in the welfare reform bill, published tomorrow, is a new rule that will achieve just that. You have to wonder whether it will survive in its current form.

Iain Duncan Smith’s ambitious plan to create a new Universal Credit will extend a savings means test — applied to those on out of work benefits — to working families that would currently be eligible for tax credits.

This will mean any working family with savings of more than £16,000 will have no entitlement to universal credit, once the system is in place.

That affects around 400,000 working households, taking in some cases more than £100 a week from their wallets.